Western tech firms will expand in South-east Asia

Significance Although several countries, including Thailand and Vietnam, also have laws which restrict the internet -- and affect foreign tech companies through data localisation and other requirements -- Western companies are inclined to downplay this aspect of the region’s tech sector. Impacts The new US infrastructure plan, which has USD65bn earmarked for digital infrastructure investment, may dampen US tech investment overseas. A potential US-South-east Asia digital trade agreement would not prioritise human rights. US and Chinese firms will compete for cloud services contracts in the region.

Subject Emerging US policy towards South-east Asia under the Trump administration. Significance On May 5, the 30th US-ASEAN Dialogue opens in Washington, to be co-chaired by US Secretary of State Rex Tillerson. This follows Vice-President Mike Pence’s visit to Indonesia of April 20-22, the first to South-east Asia by a cabinet-level official from the Trump administration. The White House used that occasion to announce that President Donald Trump will attend the APEC meeting in Vietnam and the East Asia Summit (EAS) in the Philippines in November. Impacts Trump may co-chair a US-ASEAN Summit with Philippines president on the EAS’s margins, which could improve frayed bilateral ties. Congress could frustrate any Trump administration plans to sanction countries with trade surpluses with the United States. An ASEAN-US free trade agreement is unlikely soon. Trump has invited Vietnam’s prime minister to visit Washington later, which could make Hanoi more bullish towards China.


Significance The ADMM-Plus is primarily a confidence-building forum, but Esper will need to navigate various issues that will affect US security relations in South-east Asia for the remainder of President Donald Trump’s current term. Impacts The forthcoming US election could further diminish Trump’s attention towards multilateral meetings. US defence ties with Singapore and Vietnam will grow more easily than with Thailand and the Philippines. US counterterrorism cooperation with South-east Asian states will likely grow.


Significance Although internet use in the region fell slightly after lockdown conditions were lifted, it is still above pre-pandemic levels. Yet the region’s digital divide is extensive. Within ASEAN, only Singapore is considered to have fully developed digital infrastructure, with its financial, healthcare, education and transport sectors digitised. Impacts ASEAN’s attempt, led by Thailand, to formulate common rules on digital taxes and content verification will falter. The pandemic will make Cambodia and Laos more dependent on Chinese aid for digital development. Japan and Australia are set to become important technology partners to South-east Asia.


Subject India's response to violence in Myanmar's Rakhine State. Significance India last month deployed additional troops along its border with Myanmar, as Myanmar’s military continues operations against the ethnic insurgent Arakan Army in Rakhine State. Meanwhile, Prime Minister Narendra Modi’s ‘Act East’ policy for greater engagement with South-east Asia features increased infrastructure investment in Myanmar, including in Rakhine. Impacts Myanmar’s military will intensify operations against the Arakan Army. The Arakan Army may align tactically with the Arakan Rohingya Salvation Army, but such a tie-up would not endure for long. Bangladesh could come to view the Arakan Army as a useful proxy to push back on Myanmar’s military for the Rohingya crisis.


Subject Taiwan's trade policy. Significance Washington's abandonment of the Trans-Pacific Partnership (TPP), a comprehensive free trade agreement between economies on both sides of the Pacific Ocean, is prompting Taiwan to seek a new direction in trade policy. Taiwan’s president, Tsai Ing-wen, is seeking to increase trade and investment with partners other than China -- particularly with India and South-east Asia -- and pursue a bilateral trade agreement with the United States. Tsai's Presidential Office has already established a special office to promote trade links with India and South-east Asia. Impacts Taiwan will be subject to intense China-US rivalry, with both seeking to draw the island away from the other. Beijing will put pressure on Taipei to resume cross-Strait economic expansion efforts. Trade with India will expand, but will still be dwarfed by exports to China. Tsai's 'New Southbound Policy' initiative is unlikely to reduce Taiwan’s reliance on the China market significantly.


Subject Expansion of fintech in South-east Asia. Significance South-east Asia is primed for a rapid expansion of financial technology ('fintech'), despite a lack of both digital infrastructure and region-wide regulation. The region is seeing growing demand for electronic payments. Impacts As fintech develops across South-east Asia, acquisitions of smaller local companies by large players will increase. In many local markets, foreign companies will be forced to rely on local fintech providers. New regulations could provide opportunities for new forms of digital protectionism. Malaysia is well positioned to be a leader in Islamic fintech.


Significance Trump had said his attendance was certain, but now he appears less sure. This is raising fresh questions about his administration’s policy towards South-east Asia, a region which received more attention under his predecessor, Barack Obama. Impacts Less US influence in ASEAN could benefit China, though ASEAN states will still seek US involvement to hedge against Beijing. US policy towards South-east Asia will be driven more by Congress than the White House. The White House is unlikely to prioritise good governance or human rights over trade initiatives.


Subject FTA talks and trade tensions between the EU and ASEAN countries. Significance The EU is in free trade agreement (FTA) negotiations with some ASEAN states, even though talks over an ASEAN-EU FTA were paused in 2009. Separately, the EU is pressuring several South-east Asian countries with its trade policies and warnings over human rights. Impacts EU projects in South-east Asia related to sustainability and social justice could suffer reputational damage. Post-Brexit, the United Kingdom could distance itself from EU labour requirements to secure market access in South-east Asia. In the short term, ASEAN-EU trade frictions will have little impact on bilateral foreign direct investment.


Subject Islamic State threat in Indonesia. Significance The attack against a police post and a Starbucks on Thamrin Road in Jakarta on January 14 has resulted in tighter counterterrorism measures, including arrests of suspects and a crackdown against media outlets promoting Islamic State group (ISG). More controversially, the government is considering harsher counterterrorism laws. Impacts The ISG threat in South-east Asia exists independently of a future wave of returning fighters. Greater powers for security forces will be unpopular as these agencies have previously been accused of human rights abuses. Security agencies are likely to be under-resourced.


Significance All are aiming to revive economies badly hit by the pandemic’s fallout. The ten ASEAN states and five of the bloc’s dialogue partners recently signed a Regional Comprehensive Economic Partnership (RCEP), a free trade agreement (FTA) that will progressively lower tariffs.


Sign in / Sign up

Export Citation Format

Share Document